It’s not often that I find a reason to write about Houston twice in one week (or one decade), but sure enough, here we are. Frontier announced yesterday that it would move back from Houston’s Hobby Airport to Intercontinental. Even for people who don’t care about Houston, this is a strategic move worth discussing. It says a lot about how Frontier and Southwest operate as airlines.
Frontier decided to move its three daily Denver-Houston flights from Intercontinental to Hobby back in November 2010. At the time, the rationale given was that “Hobby offers Frontier’s guests easy access to downtown Houston and many popular tourist attractions in the area.”
For an airline that’s used to competing with United in Denver, that makes sense. This move gave Frontier an opportunity to differentiate itself from United’s service to Intercontinental by going elsewhere. Trying to serve Denver-based travelers meant Frontier was smart to look for a more convenient option. Hobby was also cheaper, but not by a ton. In 2010, the cost per enplanement at Hobby was $9.44 versus $11.06 at Intercontinental.
Here we are less than two years later and Frontier is switching back. What’s changed? A few things, I’d say.
Most importantly, Frontier is a different kind of airline today than it was just two years ago. It is now on its quest to be an ultra low cost carrier. You would think that would mean operating at the lowest cost airport, but the difference between Intercontinental and Hobby is not that great in the scheme of things. (It’s not like the deep chasm between Ft Lauderdale and Miami, for example.)
At Hobby, Frontier could have undercut Southwest. Southwest is hardly the low fare leader it once was, and that might not be hard to do, but what is hard to do is overcome Southwest’s perception as a low fare leader. Southwest’s roots run deep in Houston, and the roots are going deeper every day in Denver as well. If people want to go to or from Houston Hobby, they first think of Southwest. And since Southwest doesn’t participate in any online travel agent systems, people are going directly to Southwest.com to book.
That’s not to say that Frontier couldn’t have won some business by having a lower fare, but there’s just too much noise from Southwest there and it’s probably not a winning battle.
Intercontinental, on the other hand, looks like a low cost carrier’s paradise. It’s not insanely expensive to operate there, but more importantly, as Frontier notes in the second sentence of its press release, “Frontier will be the only domestic low-cost carrier at Bush Intercontinental.” It had to say “domestic” because VivaAerobus flies to Monterrey, Mexico. For the many people who think of Intercontinental first, those who maybe live on the north side or simply think northward, Frontier now has some real opportunity to go in and make some waves without Southwest creating problems.
This is exactly what Spirit has done at O’Hare, DFW, and many more. It goes where the big guys are, where the bulk of the traffic lies, and undercuts the heck out of it.
Frontier is, to be fair, a different animal. (Sorry, I know.) It isn’t quite running that same barebones schedule that Spirit flies. Frontier also can connect people via Denver to a lot of places. It’s something of a hybrid at this point, so United might be more interested in responding. But then again, United might not want to really get into a fare war on what should be a very profitable hub-to-hub route. It’s not like a move by United is really going to push Frontier to walk away from Houston. If Frontier starts growing further in Houston, then maybe United would be more concerned, but it shouldn’t be wasting its time on this one route.
Where does this leave Hobby? It leaves it in the same place we see Love Field, Midway, Oakland, you name it. Southwest has done an incredible job of effectively becoming a monopoly carrier at these airports and that’s a nice position to be in for an airline. Sure, JetBlue is still at Hobby, but would it stay if Southwest started flying from there to LaGuardia? I’m not so sure. Other than that, it’s just regional jets on American to DFW and Delta to Atlanta. Pretty sparse.
So, Southwest will continue to have what’s effectively its own airport on the south side while everyone else stays north.